After the Colorado Gaming Commission approved several license requests on Thursday, the group spent the bulk of its meeting listening to testimony. The parties who testified all spoke to their opinions on the gaming tax rate for the next fiscal year.
Among the witnesses were analysts, city and county leaders, and representatives from the CO Gaming Association. The testimony was insightful but featured diverse opinions.
What licenses did the Colorado Gaming Commission approve Thursday?
The Colorado Limited Gaming Control Commission renewed the license of G Investments. That company does business in the state as the Colorado Grande Hotel and Casino.
The Commission granted three temporary major vendor licenses Thursday as well. All three new licensees are companies that provide operations infrastructure like oddsmaking to Colorado sportsbooks.
Finally, the Commission approved 31 requests for minor vendor licenses. All the votes on all the license applications and renewals passed unanimously.
From there, the Commission moved on to a crucial matter for many in the state. That’s the continuation of consideration on where to set tax rates for casino gaming operators for the next fiscal year.
Why the Commission held testimony on gaming tax rates
The regulations for legal gambling in CO require the Commission to hold hearings on gambling tax rates each year. These are open to the public but certain interested parties receive invitations to testify.
While most states have a fixed rate for casino gaming, CO law makes taxes a fluid situation. CO law charges the Commission with setting the brackets and rates for its graduated tax system on an annual basis.
Initially, the Commission had a great amount of freedom in determining those levels. In 2008, however, CO voters approved Initiative 50. Among other things, that set limits on the discretion of the Commission on rates and tiers.
Instead of charging a flat rate to all casino operators, the tax on casino revenue in CO is graduated. As casinos earn more revenue, the tax rate they pay increases.
Currently, those rates vary from 0.25% to 20%. The state had six different tiers for its casino operators in 2019. Although the law limits the extent to which the Commission can lower and raise the rates, the Commission does have a good deal of freedom in regard to the number of tiers and the thresholds for those tiers.
Because of the recent coronavirus pandemic, several witnesses’ testimony stressed the importance of these decisions this year. The witnesses differed in their recommendations for how best to approach the situation, however.
Highlights of the gaming tax testimony on Thursday
Starting off the hearing Thursday was the CO Division Gaming’s Chief Auditor Paul Hogan. He presented a report concerning the cities of Black Hawk and Central City.
Hogan recommended the Commission leave the rates and tiers exactly as they were for 2019. The next person to testify to the Commission echoed that sentiment.
Paul Harris, finance director for the City of Cripple Creek, laid out the challenges facing one of CO’s gambling capitals right now. Those all center on the fallout from the coronavirus pandemic.
“Overnight, we were really turned into a ghost town,” Harris commented.
Harris said that Cripple Creek has waived device fees usually levied on casinos, representing a cost of $617,000 to the city. While that is going to help casinos in the city recover, it means a greater strain on the city’s finances.
Harris also shared that the city has already cut over $2.2 million from its current budget. That amount equates to a 20% cut. Harris stated that gaming revenues in Cripple Creek are down 70% compared to the same point last year.
The city now estimates that it will only receive half of its projected revenue from gaming taxes this year. Two representatives of nearby Gilpin County echoed Harris’ sentiments.
More stark news from Gilpin County
Gail Watson, a member of the Gilpin Co. Commission, came on the call to share the harrowing details of the struggles facing her municipality. In short, the shuttering of Black Hawk and Central City casinos has devastated the area.
Watson said that half of the county’s budget comes from gambling and that half of the county’s inhabitants work for the casinos. The county has already furloughed 52 of its 200 employees and is looking at cutting its budget by 25%.
Abel Montoya, the county’s manager, shared further details. He stated that he projects a loss of $4 million for the county as compared to initial projections and that he sees more layoffs in the future.
Both county officials also implored the Colorado Gaming Commission to leave the rates and tiers at 2019 levels. They got support for that idea from an objective source.
RubinBrown weighs in on CO tax rates
RubinBrown LLP, a group the Commission contracted to perform a study of gambling revenue in the state, presented its findings to the members. Daniel Holmes, the firm’s gaming partner, shared that CO is already on the upper-end of tax rates for similar states.
RubinBrown’s projections put the loss of revenue for the state at $100 million, but that model was just through April 30. The longer CO casinos remain shuttered, the greater that number grows.
Despite those two factors, Holmes described CO casinos as competitive and healthy. To maintain that status, Holmes argued, the Commission should keep rates and tiers at their 2019 levels.
The next round of testimony represented voices of dissent on one point and agreement on another. This group represented the casinos before the Commission.
The casino industry gets its two cents in
Executive Director of the Colorado Gaming Association Peggi O’Keefe led the next item on the agenda. The CO Gaming Association is a trade organization for casino operators in the state.
While previous witnesses argued that every dollar they could get from gaming taxes is absolutely crucial right now, the association stressed the challenges facing casinos in the state. Ultimately, the association pleaded for a lower tax rate.
The arguments for doing so included enabling CO casinos to get more laid-off workers back to work sooner, which will have a positive snowball effect on local economies. Commission members agreed with that logic and a proposal sprung out of the conversation.
One option that could represent a compromise is to leave the tax rates at their 2019 levels but raise the thresholds for the tiers, thus affording casinos some financial relief. After some discussion, the Commission went into closed session.
Colorado Gaming Commission’s decision on taxes for FY2020
After spending about half an hour in executive session, the Commission members returned to public session. The members then unanimously voted to keep the rates and tiers at their 2019 levels.
Among the reasons for that decision was a lack of data to suggest a radical adjustment to the structure would have a net positive affect. As Commission Chair Kristen Blessman said “two months does not make a trend.”
The Colorado Gaming Commission will continue to monitor this situation as the year progresses but for now, the tax structure for CO casinos remains the same as it was last year.